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The Essence of a Successful Noodle Business Location in the Future – What is Trade Area Analysis? Chapter 3

This report analyses the Japanese market.

Chapter 2: Why Do So Many People Make Mistakes in Location? This is a continuation of “Why do so many people make mistakes in location?

Internet business is in its heyday. For Amazon and other companies that sell products on the Internet, the storefront has become the home page, and the battle is how easy the home page is to understand and how easy it is to be searched for.
Internet advertisements are becoming more and more popular so that as many people as possible can find their products on the Internet.
Therefore, for Internet businesses, the actual location of the store or headquarters is no longer a factor that affects sales.

It does not matter to the buyer where the headquarters or sales office is located. For example, product quality, price, ease of purchase, service, and other factors that have nothing to do with location determine the success or failure of a business.
And the pace is so fast that it is no secret that many bookstores, department stores, and retailers have gone bankrupt because of Amazon’s rapid growth.
In addition to these Internet businesses, restaurants, which are real businesses, have also been greatly affected by the Internet.

For example, restaurant comparison websites have been created to show the scores of restaurants throughout Japan.
The effect of the scores from these restaurant comparison websites is extremely large, with a greater concentration of customers slanted toward highly rated restaurants and a greater decline in customers toward those that are not rated highly, and the superiority or inferiority of the restaurant is determined very quickly.

As a result, the average life span of udon noodle and ramen stores is extremely short these days, about 2.4 years, with a 42-3% closure rate of newly opened stores closing after less than one year and a 72-3% closure rate after less than three years.

The Internet and social networking services are the main reason for such a shortened life span. Nowadays, customers spread the word through SNS, so the speed at which udon noodle shops flourish is increasing, and the speed at which they go out of business is also increasing.
As I mentioned in the case of the dreaded Sanuki Udon, remote places can be more popular.
Therefore, if a restaurant is particular about the level of its products and services, location is no longer a major factor in its prosperity.

1. Best location strategy

I believe that in the future, it is the productive restaurants that will survive in the food and beverage business, genre-wise,

1.Fast food
2.Cafes
3.Fine dining
I believe that the best locations for these three categories are no longer required as in the past.

One example that I believe should be emulated in fast food in the future is the Shake Shack hamburger restaurant. Shake Shack was founded in New York and is extremely popular because of its outstanding products and high level of service. Currently, Shake Shack is rapidly expanding around the world, and 13 stores have already opened in Japan.

Danny Maier, the Jewish-American founder and owner of Shake Shack, is a successful restaurant businessman who runs many popular restaurants such as Union Square Cafe and Gramercy Tavern, where reservations are hard to come by. In his book, “The Genius of Hospitality,” he touches on the difference between service and hospitality.

When you create such an attractive restaurant business, you will be inundated with requests to open new restaurants from landlords who have good locations without having to worry about location. I believe that creating a business model that can be accepted globally is the key to success in the restaurant business without having to worry about location.

In short, perfecting a polished and attractive business model is the most effective method of location strategy and will be unrivaled.
Building a superior business model is the foundation for long-lasting success, free from competition.

2. Basic Concept of Location

In general, the lowest rent in central Tokyo is about 10,000 yen per tsubo, and the highest is about 70,000 to 80,000 yen per tsubo.
It is important to balance rent and sales. In the noodle business, rent should be kept within about 7% of sales.
Thus, if rent is 300,000 yen, monthly sales should be at least 4 million yen; if rent is 200,000 yen, monthly sales should be at least 3 million yen; and if rent is 150,000 yen, monthly sales should be at least 2 million yen.
Thus, we always consider the balance between rent and sales when selecting a location.

Except in the center of a large city, most domestic stores are located in suburban areas. One mistake that many people make in suburban locations is selecting a location along a busy highway.

The most unsuitable locations for udon noodle and ramen stores are along highways and roads with fast traffic speeds. Fast moving cars are not suitable for noodle businesses.
In addition, the competition is very fierce because of the large number of restaurant giants that have opened stores along main roads.

On the other hand, roads with slow traffic speeds, where even female drivers can easily drive, are suitable for noodle shops, and locations with slow traffic speeds along residential roads are the target.
There is a clear difference between arterial roads and roads for daily life. On arterial roads, industrial vehicles, large trucks, dump trucks, etc. are running rapidly, while on the other hand, women drivers are driving passenger cars to do daily shopping and other leisurely activities on roads for daily life.
However, it is important to secure the number of parking spaces along the main road as determined by a trade area analysis.

Common failures are stores that open along arterial roads and have a small number of parking spaces.
Especially during the daytime on weekdays, many customers come to the store at a rate of one car per person, so no matter how many seats are available inside the store, if the parking lot is full, no one can get in.

Therefore, it is essential to secure a parking lot, and each car requires a parking space of about 3.5 square meters. Therefore, if a store with 50 seats is to be built, the building area must be at least 30 tsubo to 40 tsubo, and since the number of parking spaces is at least 30, the parking area alone is 210 tsubo, which means that the total land area must be 300 tsubo.
Most failures of suburban stores are due to insufficient parking space.

3. How the Internet, SNS, and AI will change locations

As I have already mentioned, with the development and evolution of the Internet and social networking services, location is no longer such a major issue in the restaurant business as it used to be.

As the Internet moves from the current 4G to 5G, which is capable of processing big data, we will enter an era in which we will be able to easily find out the real-time congestion status of many restaurants with our smartphones. This will eliminate the problem of customers canceling their reservations, which has been a major problem in the past, and will have a major impact on business.
In short, the number of customers who dine at a restaurant will be in balance with the number of dishes prepared at the restaurant, and food loss will be greatly reduced.

The restaurant will no longer have to wait in line, and if you make a reservation, you will be able to eat immediately, eliminating the loss of waiting time and making eating and drinking behavior very efficient.
I believe that this will lead to a return to the original form of eating out, which is to open restaurants in locations where there are many customers who are looking for the kind of restaurant they want.
If you want to open a restaurant with this concept and attract customers with this kind of lifestyle, AI will be able to find the best location for you.

And as competition in the restaurant business becomes more sophisticated, there is a possibility that many people will be attracted by creative restaurant businesses that cannot be fully judged by AI.
Therefore, there is a great potential for innovative restaurant businesses that will always outwit AI, and the restaurant business will become more sophisticated and complex.

For example, Shake Shack, which I mentioned earlier, was a very successful restaurant company in the past with a café and fine dining business.
The company that was very successful in cafes and fine dining has now moved on to easier fast food, and other companies that originally started out in fast food will not be able to compete with them.
In short, the level of competition will be completely different.

In the future, if companies that have succeeded in upstream food service seriously embark on downstream fast food, I believe they will be able to build very strong businesses.
In particular, I believe that the hotel industry, which has a high level of hospitality, will enter the restaurant business.

4. How will location strategies change with Uber Eats?

Car-delivery apps that started in the U.S. have become successful all over the world, and in some regions, companies in the same category have sprung up one after another with great success.

Uber and other companies in the same category are now entering the restaurant delivery business. In Japan, where Uber is basically not recognized, Uber Eats, the delivery division of Uber, has started food delivery and is rapidly expanding its area.

Starting with the 23 wards of Tokyo, it is still only available in the central urban areas, but it is expanding its area one after another to include Kanagawa, Chiba, Saitama, Nagoya, Kyoto, Osaka, Hyogo, and Fukuoka.
With the advent of Uber Eats, restaurants specializing in Uber Eats delivery are beginning to appear.
Restaurants used to have to do delivery on their own, but now they can have Uber Eats take care of delivery without any investment on their part.
This way, you don’t have to choose the location, you don’t need seating, and you only need to equip the kitchen, so the investment is low. On top of that, you don’t need customer service personnel, so everything becomes a lot easier.
In metropolitan areas like the ones where Uber Eats operates, there is a strong possibility that more and more restaurant businesses will specialize in Uber Eats.

However, even in this case, competition within Uber Eats is expected to be tougher, as customer feedback reactions will always be available to everyone on social networking sites.

In addition, since Uber Eats delivery staff carry food by bicycle or autobar in a box carried on their backs, it is important to take measures to ensure that the food is not disturbed by vibration, etc. Food suitable for delivery (food that tastes good even after hours of delivery), beautifully arranged food, and a container for delivering food in a one-way delivery service are also important factors. The container for one-way delivery of food is also an important factor.
The emergence of Uber Eats is expected to significantly change the competitive structure of the restaurant industry.

5. Productive businesses are taking good locations

The final key issue for the future of the restaurant business is high productivity, which is also a prerequisite for survival.
We can see the image of a company that continues to pursue a business model that maximizes profits, armed with IT behind the scenes, while providing food and service that continues to fascinate and impress customers.
The evolution of IT is entering its next era of change, and even the restaurant business cannot be separated from the integration of IT.

Therefore, what is required of restaurant business managers in the future is not simply to concentrate on the culinary world, but to have a broad understanding of all fields, to have experts in each field under their control, and to have the talent to anticipate the major changes of the times and continue to take on the challenges of new opportunities.

First, it will be essential to have an innovative corporate structure with a wide range of experts within the company, including IT experts, innovation and marketing experts, hospitality and psychology experts, and culinary, scientific, and food chemistry experts.
At the same time, it will be essential to form alliances with companies that have a variety of strong specialties.

And while until now such alliances have generally been between domestic companies, from now on it will be essential to form alliances with strong companies that transcend national borders and have a global level of expertise.
Continuously increasing productivity is an important issue not only for the restaurant business, but also for businesses like ours and for all businesses, not to be forgotten even for a single moment.

Continued in Chapter 4: Successes and Failures in Location Strategy.

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